McClatchy Sued Over Alaska Newspaper Sale

ANCHORAGE, Alaska (CN) — Alaska Dispatch Publishing claims McClatchy Newspapers misrepresented key points of the sale of the Anchorage Daily News, including an “onerous” two-year contract with the AP that cost $290,000 more than McClatchy said. The Dispatch sued McClatchy on May 5 in Anchorage Superior Court, demanding more than $700,000 in damages for seven claims of breach of contract and implied covenant of good faith and fair dealing. Publisher Alice Rogoff purchased the print-based Anchorage Daily News in 2014 for $34 million. She has owned 90 percent of the online-only Alaska Dispatch — which has been competing with the Daily News for stories and readers — since 2009. Rogoff combined both news organizations into one, becoming the Alaska Dispatch News. The Dispatch’s complaint describes a rougher than expected transition, which it blames on McClatchy’s failure “to perform many of the obligations” set forth in the parties’ 55-page stock purchase agreement. Rather than purchase the assets of Daily News from McClatchy, the sale involved a stock purchase agreement with a complicated array of stipulations. Under the agreement, Alaska Dispatch agreed to assume a portion of debts like workers’ compensation claims up to $250,000 provided they were handled reasonably — a point the Dispatch says it can’t verify because McClatchy won’t provide documentation about the claims. Additionally, Alaska Dispatch says it had to pay a $24,677 security deposit back to a company that rented space in McClatchy’s building because the newspaper giant never did so and the Dispatch couldn’t clear the sale of the building until the deposit was given back. But the Dispatch says McClatchy’s biggest misrepresentation relates to a contract with the Associated Press. “Initially, McClatchy failed to disclose the existence of an onerous and costly two-year contract with the Associated Press,” the Dispatch says in its 9-page complaint. “McClatchy tried to cure this omission just prior to the signing of the stock purchase option, but Alaska Dispatch Publishing timely objected to assuming this obligation. “In addition, while McClatchy did disclose this obligation it did so in a manner that would suggest that the value of the contract with AP was less than $50,000, when in fact the obligation was in excess of $340,000.” The publisher says it paid off McClatchy’s debt to the AP. McClatchy also agreed to give Alaska Dispatch accounting assistance for 90 days to help with the transition but gave financial data that was incomplete and outdated according to the complaint and no access to the accounting software McClatchy used, according to the complaint. “Based on the incomplete nature of the accounting information, ADP had to retain the services of two accountants who worked for nine months to get the finances updated and the books closed,” the Dispatch says in its complaint, adding that this cost the paper $100,000 in extra costs for the accountant’s time plus additional financial losses “as a result of not being able to function properly from a financial standpoint.” Alaska Dispatch Publishing seeks compensatory, consequential, punitive and exemplary damages from McClatchy. It is represented by David Gross and Mara Michaletz of the Anchorage firm Birch Horton Bittner & Cherot. Neither party returned email requests for comment by press time. The Dispatch’s publisher Rogoff, 64, is the wife of Washington-based philanthropist and financier David Rubenstein, listed by Forbes as one of the wealthiest people in the United States. For years, Rogoff has been a supporter of Alaskan interests including founding the Alaska Native Arts Foundation and the Alaska House Art Gallery in New York. Former journalist and Alaska Republican Party blogger Suzanne Downing reported the Alaska Dispatch has lost $6 million in its first year of taking over the Anchorage Daily News. Rogoff quoted Amazon CEO and Washington Post owner Jeff Bezos in a March editorial in the Dispatch, writing, “‘We’re in investment mode.'”